Correlation Between Gaztransport and Rockfire Resources

Can any of the company-specific risk be diversified away by investing in both Gaztransport and Rockfire Resources at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Gaztransport and Rockfire Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gaztransport et Technigaz and Rockfire Resources plc, you can compare the effects of market volatilities on Gaztransport and Rockfire Resources and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Gaztransport with a short position of Rockfire Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gaztransport and Rockfire Resources.

Diversification Opportunities for Gaztransport and Rockfire Resources

-0.22

Correlation Coefficient

Gaztransport  Rockfire Resources

Very good diversification

The 3 months correlation between Gaztransport and Rockfire is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Gaztransport et Technigaz and Rockfire Resources plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockfire Resources plc and Gaztransport is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Gaztransport et Technigaz are associated (or correlated) with Rockfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockfire Resources plc has no effect on the direction of Gaztransport i.e., Gaztransport and Rockfire Resources go up and down completely randomly.

Pair Corralation between Gaztransport and Rockfire Resources

Assuming the 90 days trading horizon Gaztransport is expected to generate 7.07 times less return on investment than Rockfire Resources. But when comparing it to its historical volatility, Gaztransport et Technigaz is 10.11 times less risky than Rockfire Resources. It trades about 0.07 of its potential returns per unit of risk. Rockfire Resources plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Rockfire Resources plc on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Rockfire Resources plc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Gaztransport et Technigaz  vs.  Rockfire Resources plc

Gaztransport et Technigaz

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gaztransport et Technigaz are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Gaztransport is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Rockfire Resources plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rockfire Resources plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Rockfire Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gaztransport and Rockfire Resources

The main advantage of trading using opposite Gaztransport and Rockfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gaztransport position performs unexpectedly, Rockfire Resources can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Rockfire Resources will offset losses from the drop in Rockfire Resources' long position.

The idea behind Gaztransport et Technigaz and Rockfire Resources plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.